British Columbia Securities Commission Levies $500,000 Fine Against Cryptocurrency Platform

The British Columbia Securities Commission’s hearing panel has imposed a financial penalty of half a million dollars on a defunct, unsanctioned crypto trading operation from the Cayman Islands. Additionally, they have issued a promotional ban on the platform in the province of British Columbia.

The panel’s punitive resolution from September 17 illustrates the endeavor of regional regulatory bodies to exert control over cryptocurrency exchanges.

LiquiTrade Ltd., which ran a trading platform by the name of Latoken, had been actively marketing to citizens in British Columbia, as reported by the commission’s chief executive.

Many overseas cryptocurrency exchanges, such as LiquiTrade, don’t directly sell cryptocurrency assets but rather offer contracts representative of these assets. These are treated as derivatives, which brings them under the ambit of securities regulations.

This means that crypto exchanges must register with a securities regulator within Canadian provinces and comply with established norms.

A verdict in July confirmed that LiquiTrade was operating within British Columbia without legal authority. Investigators from the commission were able to create user accounts on the exchange utilizing computers within the province via a British Columbia IP address.

Following the sanctions, the exchange implemented measures to prevent the registration of new accounts using IP addresses and phone numbers from British Columbia, although the panel was informed that it’s still possible to bypass these restrictions using VPN technology.

The panel withheld judgment concerning VPN usage, noting: “We acknowledge LiquiTrade’s change in behavior to be a mitigating factor to a certain extent. We must underline, however, that we are not concluding whether LiquiTrade’s inability to keep British Columbia residents off its platform using disguised IP addresses constitutes an infraction of the law.”

They also pointed out that there is no evidence to suggest any individual investor suffered financial loss due to LiquiTrade, and the number of LiquiTrade users in British Columbia was likely minimal according to the executive director.

‘High degree of risk’

The panel made reference to a report commissioned by the Ontario Securities Commission from Inca Digital, Inc., dated April 26, 2022, which indicated that a mere 0.79 percent of LiquiTrade website visits were made by Canadians, according to web traffic and social media analysis.

Through its written verdict, the panel elaborated on the necessity for regulators to act against unregistered foreign crypto exchanges.

“Crypto assets are notably volatile, and investments in these assets come with considerable risk. Some crypto asset trading platforms and markets are less regulated than traditional exchanges.

“The Commission, along with other Canadian securities regulators, aims to alleviate some of these risks by enforcing regulations that mandate entities to facilitate local residents trading in crypto assets. Such protective measures are futile if ignored.”

The panel’s statement didn’t cover the concern of trading platforms being potentially exploited by swindlers, as indicated by external sources.

Thus far, the commission’s findings show that many companies have ignored notices of hearings, and those that are prohibited in Canada may continue to provide services to individuals in British Columbia.

LiquiTrade neglected to respond to the notices from the commission and chose not to contribute submissions on sanctions or participate in any way during the sanction hearings.

You can find the decision online.

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